Savings rates rocket following base rate hike. Here's the highest saving rates right now

On 4 August the Bank of England raised its base rate to 1.75%. This 50 basis points increase was the biggest single rise in 27 years. While the move wasn't entirely unexpected, the rise has signaled that the UK's central bank is starting to take inflation very seriously.

A higher base rate can have a big impact on savings rates, as rates typically become more generous as borrowing costs increase. While in the past we've seen providers shy away from offering savers a fair deal, the tide has undoubtedly now turned.

Over the past few weeks rates on market-leading easy-access and fixed accounts have rocketed. So, if you're sitting on a pile of savings, now's a great time to move your money.

How does the base rate impact savings rates?

The base rate refers to the rate at which banks can lend from one another. Over the past decade or so, interest rates have stood at rock-bottom levels. Because of this, the UK has become accustomed to cheap borrowing and pitiful returns for savers. However, so far in 2022, the Bank of England has hiked its base rate on FIVE occasions. Plus, members of the bank's Monetary Policy Committee have indicated further rises may be on the horizon if inflation doesn't subside.

When the base rate rises, borrowing becomes more expensive. This is why rising interest rates often leads to lenders hiking the cost of new mortgages, loans, and other types of credit. A climbing base rate also has a big impact on savings rates. Put simply, as the base rate rises, savings rates should also rise.

However, in the past we've seen banks and building societies show reluctance when it comes to passing on any base rate rises to savers. Because of this, it's best to expect savings rates to generally head upwards whenever the base rate rises.

In other words, while market-leading savings deals often become more generous when the base rate rises, rises that are exactly in line with the size of any base rate rise are a rarity. For example, while the top market-leading deal has since increased since Thursday's hike, the top rate hasn't increased by as much as 50 basis points.

What are the highest savings rates right now?

If you're a saver, it's a good time to sort your money as rates are rising across the board.

Easy-access savings

A few weeks back, we raved at Chase Bank's easy-access savings account paying 1.5% AER variable. The account is still available right now though to open it you must first open Chase's current account.

However, this account has now lost its shine somewhat as there are now other accounts paying higher rates of interest. For example, a few weeks after Chase entered the UK savings market, Virgin Money launched its M Plus current account. Like Chase, it offered customers a linked savings account paying a juicy interest rate. However, Virgin went one better than Chase, offering 1.56% AER variable. Fast-forward a few weeks and Virgin upped its rate to 1.71%, firmly putting itself at the top of the best-buy tables at the time.

However, since last Thursday's base rate hike, Shawbrook Bank upped its easy-access rate. Its account now pays 1.75% AER variable, matching the Bank of England base rate.

However, it's no longer the highest rate. Zopa now takes that crown, with its app-only easy-access offering paying 1.81% AER variable. The account can be opened with as little as £1.

Fixed savings

Like easy-access deals, rates on fixed savings accounts are also heading in an upward direction. Right now, the highest paying fixed savings account pays an enormous 3.45% AER fixed. To get this rate, however, you must be willing to lock away your cash for five years. So, before you consider United Trust Bank's five year fixed account, understand that a lot can change in half a decade.

For example, savings rates may start to rise everywhere over the next year or two, potentially as a result of soaring inflation. Likewise, rates may also rise should the UK economy look a little rosier in future. However, when your money is in a fixed account you can't access your cash before the term's up. This is why locking away cash for a very long period of time is a big risk.

So, if shorter fixes are more your thing it's worth knowing that rates have risen on these accounts too. Right now, Union Bank of India pays savers 3.2% AER fixed for one year, or 3.3% AER fixed for three years. You can open either of these accounts with £5,000+.

Important: All accounts mentioned above have the full £85,000 FSCS savings safety protection.

Will savings rates continue rising?

If the Bank of England makes further hikes to its base rate then, yes, savings rates are very likely to continue rising. However, if you currently have savings it's best not to wait for rates to (potentially) go higher in future. Remember, easy-access accounts allow you to add and withdraw cash at will. So if more generous accounts launch in future, you can simply move your money. Obviously this flexibility doesn't apply if you opt for a fixed account.

For more savings tips, and an updated list of the top accounts, take a look at our best savings accounts guide. And with rising rates, be aware of going over the Personal Savings Allowance, which you can read about here.